Mark Twain tells of a sign in the wheel house of the Mississippi paddle boats which read "Don't speak to the helmsman - don't spit on the floor". It's a good motto for ex-leaders. But I am not quite an ex-leader yet, so here are some thoughts, as we embark on the gruelling election trail which our party likes to devise as a torture for those with the cheek to wish to be its leader. (Can it really be 11 years since I did it ?). It is, incidentally, not necessary for parties to love their leaders - to respect them is usually enough. But it is vital for leaders to love their parties - otherwise why would we put up with it? And that applies especially to our beloved Lib Dems, who are, bless them, inveterately sceptical of authority, often exasperating to the point of dementia, as difficult to lead where they don't want to go as a mule and as curmudgeonly about success as one of those football supporters who regards his team's promotion to the premier league as insufficient, because they haven't also won the FA Cup! But that's what makes them liberals; and fun to be with; and inextinguishable in defeat; and bottomless in the commitment they will give you when you ask for it; and recklessly generous of your faults and quite simply the best party to lead in the world.

Being the leader of one of the other two parties is like heavy weight boxing - it's a question of slugging it out till one of you drops. But being leader of the Liberal Democrats is more like jujitsu. The trick is to take the momentum of forces you are given and turn them to your advantage. First, the pluses. Events are moving our way. Many of the things for which we have campaigned so long are now the commonplace of government. And much more is waiting to happen, if we have the courage to make it so. The new, less tribal, less destructive politics for which we have been calling, is beginning to take shape. The old system, in which power was held, centrally and secretly by an arrogant elite, is slowly but surely being dismantled. In its place, a new, fairer, more democratic and more open system is being built. And we have been one of the forces that created this. We have waited most of the years of this century for this moment to arrive. Our place is at the centre of the process, not standing aside watching it happen.

But it is more than our institutions which are changing. The shape of our politics is changing, too. It happened in the middle of the last century and again in the early years of this. And it is happening again now. There are not three parties in Britain, there are five. Pro-Europe and anti-Europe Tories. Old Labour and New. And the Liberal Democrats. The re-shaping of politics is waiting to happen. What it needs is a context and an event. The context is PR and the event is the euro. The referendums on both of these will be the big events of the next leader's early years. Here and elsewhere across the western world, there is a new centre-left movement gathering around a broadly liberal agenda. It will replace the Thatcherite consensus as the dominant governing force in most western countries for the next decade. The most difficult task will be to ensure that, without losing our identity, we stay at the centre of this process and do not choose to be excluded from it. With socialism dead, and conservatism dying, it is our emphasis on individual choice and internationalism which makes the liberal and democratic creed uniquely relevant to the challenges of the next century. Explaining that approach with greater clarity and more conviction than our rivals is probably the second greatest challenge. The third is to resist two temptations - of tribalism and of the old left. All parties are, by instinct, burrow animals. They much prefer huddling together, enjoying the rituals of purity than running the risks of contamination in the wider world. It's what makes parties fun. And it's how we survived in the wilderness years. But this is not a time for taking shelter. It's a time for taking risks.

One of the jobs of leaders is to poke their parties with a sharp stick from time to time, so that they live in the real world. For just as we face our greatest opportunity of this half century, so also we face our greatest threat. And they both come in the same form - that of Mr Anthony Charles Lynton Blair, our puzzle of a prime minister. He has spotted that the only political ground which makes any sense, now that socialism is dead, is the ground on which we stand. He likes to call it the Third Way - but actually it's liberalism - or at least that's what it will become. (Which is why, incidentally, some in the cabinet secretly call him "The Liberal"). The task which he has set himself is the modernisation of Britain. He has an infuriatingly imperfect, even muddled idea of what that actually means. But he is serious about it and, many of the things he wants, we want too. So we are natural partners with him in the cause of reform, acting as both guardian and goad for change, to make sure that it is genuinely progressive and liberal. Which is why working together where we agree more surely delivers things we want and keeps us on the field of play. Standing on the sidelines may look safer to some. But it risks leaving him the field of reform and leaving us irrelevant.

The second danger is to seek distinctiveness by moving off to the left. Curiously, those in our party most hostile to cooperation with Labour are frequently those who are keenest to pursue the policies which Labour have just abandoned. Even more curiously, many are from battlegrounds where we have to beat the Tories to win. But the main reason why going off to the left is folly is based on principle: we are liberals - not re-heated socialists. And that is what makes us relevant. We believe in the strong citizen, not big government; in enterprise and competition, not interference and the command economy; in self reliance, not social engineering. The right strategy is to be better, fleeter of foot, and more innovative on our ground in the face of Mr Blair's attempts to occupy it. The wrong one is to abandon it for more extreme territory. That's the mistake the Tories are making.

The next leader will have to choose between being right and being distinctive. It will always be better to be right. And some of being right means being on the right issues and at the right time. A third party leader very rarely get a chance to choose the issues - they're chosen for him, chiefly, I fear, by the press and Messrs Blair and Hague, in that order. If you want to have your voice heard you have to see what's coming and build your credibility on it before it arrives. I haven't mentioned the Tories. That's chiefly because there isn't much to mention at the moment. But sooner or later there will be. Sometime the Tories will return from their long excursion under Master Hague into the desert of the extreme right. And when they do, they will find the crumpled but familiar figure of Kenneth Clarke, or someone like him, patiently waiting for them to arrive. Then, some of those votes which we borrowed from the Tories because they are so awful, will go back home. To be sure we can hang on to a few. But there is a decent, centre-right minimum of 30% of the British population who want a decent centre-right home to go to - and it can never be us, because we are a party of the centre-left. It is not sensible to have a strategy which depends on your enemy continuing to behave stupidly. Which is why winning votes from the Tories may be a good tactic for today, but makes a poor basis for a long-term future. There may be a day when we can work again with a sensible Conservative party. But it's a long way away and who knows what new shape politics will have by then.

Which brings me back to Mr Blair. I have found him good company and pleasant to deal with. He always has his eye on the big picture, which is good. He is honourable, rational and straightforward, which is better. But he sometimes undertakes more than he subsequently finds he can deliver, which can be exasperating. He is a man on a journey, because he has had to abandon one set of beliefs and has yet to find another. This means that you can influence his destination. He is the least ideological politician I know. His first question is not "Do I believe in this?" but "Will it work?" It is important to remember this when it comes to the issue of PR for Westminster (I am sorry, this is the one piece of unfinished business I have to leave). It is also the reason why making a success of Jim Wallace and Donald Dewar's partnership in Scotland is vital. And he is a paradox. Is he a pluralist or is he a control freak? (This is about the only phrase I got into the political lexicon in 11 years - I do hope my successor can do better). I bet my shirt (and the party's too) on the conviction that behind that steel-ribbed pursuit of control freakery, there lurks a pluralist desperately trying to get out - who eventually will.

Enough from me. I've left a couple of bottles of whiskey in the cupboard and a bottle of champagne in the fridge. My successor will find the first a great help with difficult colleagues late at night, and I hope they will have a good reason to use the second before too long. Good luck. Have fun. I did.